Kenyans who save through SACCOs (Savings and Credit Cooperative Organizations) could soon face tighter rules, as lawmakers propose a new law designed to increase oversight and improve financial safety after the shocking financial crisis at KUSCCO.
The Sacco Societies (Amendment) Bill, 2025, introduced by National Assembly Majority Leader Kimani Ichung’wah, aims to reform how large cooperative groups, known as secondary SACCOs, manage funds and offer shared financial services.
This move follows the collapse of KUSCCO, which was at the center of a Ksh15 billion financial scandal earlier this year.
New Category to Monitor Shared SACCO Funds
The Bill introduces a new category called “Central Liquidity and Shared Services.” This refers to a system where smaller, primary SACCOs pool their funds together under a larger SACCO umbrella to offer broader services. This is the same model KUSCCO used before it ran into trouble.
Under the proposed law, SASRA (the Sacco Societies Regulatory Authority) will gain new powers to license, regulate, and supervise all SACCOs engaged in central liquidity and shared services. Previously, such oversight was not clearly defined, leaving room for financial mismanagement.
Stricter Compliance and Heavy Penalties
To ensure accountability, SACCOs operating under this model will be required to:
- Open a Liquidity Reserve Account
- Follow a strict code of conduct
- Adopt a strong governance structure
Any SACCO or individual that fails to follow these new rules could face a fine of up to Ksh3 million, a prison sentence of up to five years, or both. The goal is to discourage malpractice and protect members’ savings from being misused.
“A person who breaks this law commits an offence and shall, upon conviction, pay a fine not exceeding Ksh3 million, serve a jail term of up to five years, or both,” the Bill states.
More Power for SASRA and Redefined Roles
The Bill also gives SASRA fresh authority to set minimum capital and liquidity standards for secondary SACCOs, allowing the regulator to directly influence how these institutions manage risks and stay financially stable.
One of the more notable proposed changes involves the Deposit Guarantee Fund, which protects members’ money in case a SACCO fails. The amendment suggests replacing the current board representative—the Commissioner for Cooperatives—with the Principal Secretary in charge of SACCOs.
This change is meant to ensure better alignment with national financial policies and improve accountability within the fund’s leadership.
Clear Definitions and Roles for SACCO Types
The new legislation also clearly defines secondary SACCOs, distinguishing them from primary SACCOs, which directly serve members. It also clarifies what functions each type of SACCO is expected to perform in Kenya’s financial system.
Response to Public Anger and Loss of Trust
These sweeping reforms come after massive public criticism, especially after the collapse of KUSCCO’s liquidity-sharing scheme that left thousands of SACCO savers in limbo, with no access to their money.
By introducing strong governance systems, clear rules, specific licensing structures, and harsh penalties for violations, lawmakers hope to restore public trust in SACCOs, safeguard Kenyans’ savings, and prevent a repeat of the KUSCCO disaster.
As Parliament reviews the Bill, SACCO members and stakeholders across the country will be watching closely, hoping for a safer, more transparent cooperative finance sector.
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